While EV sales stagnated in 2024, triggering delays and cancellations, the sharp rebound in 2025 demonstrates that this slowdown was cyclical rather than structural. The recovery has restored confidence in long-term demand and underpins renewed momentum for gigafactory investments. Last year, EV market share plateaued at approximately 20%, primarily due to reduced government subsidies and stable EU CO₂ regulations. These factors raised concerns about long- term demand, with some markets even recording year-on-year declines. However, 2025 has marked a clear turnaround. The European EV market expanded by 27% in the first five months of the year, with 1.6 million units sold, signalling a strong resurgence in consumer demand and market momentum.

This growth reflects broader consumer acceptance and an expanding pipeline of EV models. Policy support also plays a key role. Germany, for instance, recently introduced a new EV incentive package that includes special depreciation allowances and tax relief for corporate fleets. This initiative is expected to significantly boost demand since corporate purchases account for more than half of new vehicle sales.

Importantly, the International Energy Agency (“IEA”) projects that this renewed momentum in EV adoption will be sustained. According to its latest forecasts, EV sales in Europe are expected to continue rising steadily, reaching approximately 60% market share by 2030. This long-term growth trajectory provides a solid foundation for scaling up Europe’s battery manufacturing sector.

As EV demand increases, so will the need for secure, sustainable, and locally produced battery supply chains. The current market rebound, therefore, not only reinforces the investment case for European gigafactories but also plays a critical role in advancing the continent’s clean technology sovereignty.

Europe’s battery industry remains heavily reliant on imported materials, with China dominating the refining and processing of key inputs across the supply chain. China controls more than two-thirds of global processing capacity for most battery metals and over 90% of anode material production, leaving Europe exposed to significant geopolitical and supply chain risks. Recent export restrictions by Beijing and Europe’s heavy dependence on imports—97% of lithium, 87% of natural graphite, and 86% of rare earths—underscore the urgency of strengthening supply chain resilience.

To address these vulnerabilities, the EU’s CRMA sets clear targets: 10% of key minerals from domestic extraction, 40% from EU processing, 15% from recycling, and no more than 65% reliance on any single country. These goals are backed by funding, trade deals, and regulations to boost refining, mining innovation, and sustainable sourcing. A circular economy is central, with rising investment in recycling, battery reuse, and secondary material recovery. The EU is also securing long-term supply partnerships with countries like Canada, Argentina, and Australia to diversify inputs. Europe’s Li-ion battery landscape is undergoing a chemistry shift that could impact its competitiveness. Despite expectations of strong EV growth, new battery-electric car registrations in the EU dropped 5.9% in 2024, reflecting price sensitivity in a weaker market. Although registrations recovered in early 2025, long- term consumer preferences remain uncertain, especially amid rising competition between NMC and LFP battery technologies. So far, European gigafactories have largely centered around NMC battery chemistry, favoured for its high energy density and premium EV performance. However, LFP is rapidly gaining traction due to its 20–30% cost advantage and suitability for mass-market models. The Stellantis–CATL venture in Spain highlights China’s export of LFP expertise into Europe. As demand shifts toward affordable EVs, LFP adoption may accelerate, challenging the viability of NMC-focused European projects. This could reinforce the dominance of Asian—especially Chinese— battery manufacturers in the region. Europe risks losing ground in today’s LFP race, where Chinese players enjoy a cost advantage, but it is simultaneously positioning itself for leadership in next- generation chemistries such as sodium- ion and solid-state. In this sense, Europe’s strategy is less about cost competition today and more about securing technological differentiation tomorrow.

To hedge against these shifts, Europe must broaden its Li-ion base to include both NMC and LFP, while accelerating the development of next-generation alternatives such as sodium-ion and solid-state batteries to secure long-term differentiation. The bigger challenge, however, lies in the region’s structural dependence on Li-ion technology, which leaves it exposed to global supply risks and China’s dominance across the critical materials value chain. Building resilience will therefore require moving beyond today’s chemistries. Startups such as LionVolt (Netherlands), Molyon (UK), Enerpoly (Sweden), and CarbonX (Netherlands) are advancing sodium-ion, lithium-sulfur, zinc-ion, and 3D lithium-metal technologies, leveraging Europe’s scientific strengths to establish a more diverse, sustainable, and strategically independent battery ecosystem.

Europe’s battery industry faces structural cost disadvantages compared to China, where production costs are up to 25% lower due to cheaper labour and energy. High labour costs and a shortage of skilled professionals continue to constrain scalability and competitiveness. In response, Europe is focusing on automation, digitalisation, and workforce development rather than direct labour subsidies. Investments in advanced manufacturing and vocational training aim to reduce dependency on manual processes and build a skilled talent pipeline. Despite these measures Europe has yet to bridge the cost gap with China, which continues to benefit from aggressive industrial strategies and lower operating costs. Recognizing that competing on price alone is unsustainable, Europe is shifting its focus from volume-driven competition to value-based innovation. This strategic pivot emphasizes sustainability, integration with the automotive sector, and the development of next-generation technologies. Rather than replicating China’s low-cost model, Europe is positioning itself as a differentiated player in the global battery market—prioritizing technological leadership, stringent environmental standards, and strategic autonomy. This approach leverages Europe’s strengths in engineering and clean energy, enabling it to compete on quality, resilience, and long-term value.

Despite challenging market conditions and sector-wide setbacks, European governments and institutions have reaffirmed their commitment to developing a robust domestic battery industry, demonstrating resilience and strategic focus rather than retreat. While private investors remain cautious, this has prompted the EU and national governments to intervene with unprecedented policy measures and financial support. A new wave of subsidies, loan guarantees, and regulatory reforms is strategically designed to attract private capital and safeguard the momentum of Europe’s gigafactory development pipeline.

The European Commission and the EIB first acted in late 2024 with a €3 billion emergency support package aimed at stabilising the European battery value chain. This included the €1 billion IF24 Battery programme to accelerate domestic cell production, a €200 million InvestEU loan guarantee top-up to help start-ups scale, and €1.8 billion in direct EIB investments across recycling, charging infrastructure, and advanced materials. These measures were conceived as rapid interventions to prevent project delays and counter competitive pressures from the US and China.

In early 2025, the European Commission introduced the Battery Booster package, designed to close the cost gap between EU- made battery cells and imports. Backed by €1.8 billion from the Innovation Fund, the package specifically targeted gigafactories and component makers to ensure that ongoing investments could move forward despite high energy prices and cost inflation

By focusing on near-term competitiveness, the Battery Booster helped de-risk projects already under development, anchoring industrial capacity in Europe.

This policy momentum culminated in March 2025 with the release of the Action Plan for the European automotive sector, which consolidated measures into a forward-looking strategy for long-term competitiveness. Within the plan, the European Commission identified over €3.8 billion in dedicated battery-related initiatives, including: €350 million for next-generation R&D via BATT4EU, €1 billion from Horizon Europe for connected and autonomous vehicles and batteries, €570 million from the Alternative Fuels Infrastructure Facility to improve repairability and accelerate charging rollout, the €1.8 billion Battery Booster package (incorporated into the wider framework), and €90 million via the Pact for Skills Fund to upskill the workforce. Taken together, these actions illustrate a sequenced approach—short-term stabilisation in late 2024, targeted cost- competitiveness in early 2025, and a long- term industrial transformation strategy from March 2025 onwards.

By integrating emergency funding, competitiveness initiatives, and structural reforms, the EU has established a foundation that enables Europe’s gigafactory pipeline to progress from announcements to active construction and scaling. This approach reinforces Europe’s ambition to build a globally competitive, resilient, and sustainable battery ecosystem.

National governments have also intensified efforts. Germany is now collaborating with US battery company Lyten, which has acquired the Northvolt Drei assets—including the Heide gigafactory project—and is working with regional and federal authorities to move forward with the 15GWh facility. In the UK, a £1 billion package supports AESC’s Sunderland gigafactory, combining guarantees and direct grants. France provided €48 million for AESC facility in Douai, while Spain raised support for major battery initiatives—awarding €133 million to Stellantis and increasing Volkswagen’s PowerCo funding from €98 million to €152 million.

While financial and execution risks persist, and global competition intensifies, policymakers are becoming more selective— prioritising projects with solid fundamentals and diversified inputs. Still, the outlook remains positive. Europe is recalibrating its battery strategy with a sharper focus on innovation, resilience, and industrial policy. Recent setbacks have underscored the need for smarter investment and EU institutions remain committed to building a robust, sustainable battery sector.

Against this backdrop, Europe’s battery production capacity continues to expand. Existing facilities have reached over 300GWh in annual capacity, largely developed through partnerships with Asian manufacturers. Projects under construction are expected to add another 500GWh and long-term plans could push capacity to 1,500GWh by 2030. This sustained growth underscores the resilience of the industry. While individual projects may face obstacles, the broader momentum reflects Europe’s commitment to scaling production in line with growing demand for EVs and energy storage..

However, structural financing constraints present a growing risk. Tight fiscal rules are limiting Europe’s ability to make meaningful public investments in cleantech, threatening the scalability and global competitiveness of its battery ecosystem. According to T&E, at least €50 billion in public funding—via grants, loans, and risk-sharing instruments— is required by 2030 to build a viable and competitive battery value chain. Establishing a dedicated green investment fund and reforming fiscal policy frameworks will be critical to avoiding long-term strategic dependence and securing Europe’s position in the global battery race..